The invention relates to finance applications or programs such as tax preparation and personal finance programs that may be utilized to prepare electronic tax returns and manage personal finances. Examples of known tax preparation programs that are include Turbo Tax®, ProSeries® and Lacerte® tax preparation programs, which are consumer and professional tax preparation programs available from Intuit Inc., Mountain View, Calif., H&R Block TaxCut software, available from H&R Block, Inc., Kansas City, Mo., and TaxACT® software, available from 2nd Story Software, Inc. TurboTax®, ProSeries® and Lacerte® are registered trademarks of Intuit Inc., and TaxACT® is a registered trademark of 2nd Story Software, Inc. Examples of known desktop and on-line personal finance programs include Quicken®, FinanceWorks® and Mint.com, Microsoft Money, which is available from Microsoft Corporation, Redmond, Wash. and other personal finance programs including wasabe.com. Quicken® and FinanceWorks® are registered trademarks of Intuit Inc.
Tax preparation programs have become very popular and allow a user, taxpayer or tax professional to prepare an electronic tax return and electronically file the return using a computer. Financial and personal information to be included in the electronic tax return can be manually entered by the user by answering questions presented in a series of interview screens. Information can also be imported from another program such as a personal finance program. The tax preparation program is operable to determine whether the user will receive a refund or owes additional taxes. In cases in which the user is entitled to a refund, the user is typically presented with options of receiving the refund from a tax authority in the form of a check that is mailed to an address in the electronic tax return or as an electronic deposit to a specific account identified by account number and routing number in the electronic tax return. If the user owes additional taxes, the user may pay the tax owed by, for example, sending a check to the tax authority or authorizing electronic payment or debit from a specified checking account identified in the electronic tax return.
While known systems and methods have worked to effectively refund taxes that have been overpaid and to coordinate payment of taxes due, they provide the user with limited options regarding how the tax refund may be utilized or invested or from which accounts the tax payment may be paid. These limitations may result in negative financial consequences that are not readily apparent to the user.
For example, once users have a tax refund check or receive the deposit in a designated single account, they often spend this “new found money” right away to purchase items such as televisions, furniture, automobiles, etc. In addition to not saving this money, the user may be burdened with more debt since the tax refund is already spent and additional money may be required to cover the additional costs beyond the amount of the tax refund. Further, the cost of such expenditures goes beyond the out of pocket money that was spent for these items.
The user may be burdened with higher interest credit card and loan debt, and not reducing the balances on these accounts results in payment of more interest and eventually more money spent out of pocket by the user. With compounding credit card or loan balances, this can be problematic.
Further, options presented by the tax preparation program to the user for a refund deposit may provide for entry of only one checking account. The refund may be deposited into that checking account but, for various reasons, may not be later moved by the user to a different checking, savings, money market or Certificate of Deposit (CD) account that earns a higher rate of interest, thereby resulting in “lost money” that could have otherwise been earned by the user.
As another example, the user may pay taxes due with a credit card rather than by payment from a checking account. The credit card may have a very high interest rate (e.g., 20%) compared to the checking account that typically has a much lower interest rate (e.g., 1%). Given tendencies of consumers to carry high credit card balances, the cost of the tax payment may be substantially higher than the actual amount of the tax payment. Similar issues arise when tax payments are made from higher interest checking, savings, money market and CD accounts rather than lower interest accounts.
Thus, users of tax preparation programs have received tax refunds in the past in the form of a single payment or into a single account, but they may not fully appreciate how that money could be utilized, how the values of those other uses can exceed the amount of the tax refund, and how spending the refund may result in additional financial burdens. Instead, they often “receive and spend” without significant thought as to other potential uses or values of the tax refund. Further, users may not select, or may not be able to select, the best source of funds to pay a tax payment. These limitations may be due in part to user decisions and/or restrictions of the tax preparation program itself, which may only provide very limited refund and payment options. Consequently, in both of the refund and payment cases, users may spend more money and/or earn or save less money than they could have and these results are often overlooked or not appreciated by users.